Show Me The Money!
And improve your cashflow ...
POSTED BY JONATHAN VOWLES ON 19/03/2019 @ 8:00AM
Everyone knows that cash is king! Just how good is your business at collecting money from your customers?
Cash is king, so make sure your money is flowing efficiently!
copyright: vladgeorgescu / 123rf
Sales and marketing are obviously vital to any business, but all the work you put into finding customers and making sales is of no use at all if you don't collect the money!
"So, how good is your business at this vitally important task?"
In fact, this is such a crucial area of your business that you need to make sure it is sorted before you spend any money at all on your sales and marketing.
Just imagine the cost of suffering from a bad debt? Let's say that you have a net profit margin of 10%, you make a sale for £100, but don't get paid. That means that you have spent £90 making that sale, and you will need to earn £900 worth of new sales to recoup that lost £90.
How can you stop that happening (either at all, or again) and the answer isn't always simple, but how about these ideas? Can you use some of them in your business?
Measure your debtor days - Or in plain English, the average length of time your customers take to pay you. Frequently, you find that businesses have credit terms of 30 days, but actually, your customers take more like 50 or 60 days!
Quite often you will find a pattern in that certain customers are good and others are bad, but you need to know and have a handle on it. It is a truism that what gets measured gets managed, so measure it as a first step in the right direction.
Set up automatic reminders - Email any customer who is more than a couple of days late. Maybe have a series of emails so that your customer gets a few automated emails before you need to take time to ring them?
Change your terms of payment - If you have a bad debt problem then getting your customers to pay on order or on delivery might make a big difference. This is made particularly easy with the rise of eCommerce processes where everyone pays on order and is used to it.
Finance the sale - If you sell something that has a large ticket price, consider using financing arrangements. Think of insurance companies who use a service like premium credit, or car companies who sell you a car loan as well as the car.
If you haven't already done so - consider getting a debit or credit card terminal.
Factoring - Would invoice finance help make a difference?
These are just 6 tips for ways to improve your cashflow, and we have many others! If you'd like to find out more about collecting money then do give me a call on 01234 752 566 or click here to ping me an email and let's see how I can help you.
Until next time ...
More about Jonathan Vowles ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas, which can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.
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